As an investor, you know that 2011 was a somewhat “choppy” year, with the financial markets going through many ups and downs. So what can you expect in 2012?
As baseball Hall-of-Famer Yogi Berra once said, “It’s hard to make predictions — especially about the future.” And these words are certainly applicable for anyone who would like an accurate forecast of the investment climate.
Yet we do know of some factors that may affect your portfolio in the months ahead:
• Strong business fundamentals. All the noise about the debt ceiling debate, the size of the U.S. deficit and the European financial situation tended to drown out some fairly good news: U.S. businesses’ balance sheets were strong for the most part, borrowing costs remained low, and corporate profits were good — and corporate profitability remains a key driver of stock prices.
• Europe’s debt crisis. It’s by no means clear how these problems will be resolved, so don’t be surprised to see them lead to intermittent, if short-lived, shocks to the markets.
• Election-year patterns. You might be surprised to learn that the S&P 500 index has shown negative returns in only three of the past 21 presidential election years.
Instead of trying to predict what will happen in 2012, you may be better off following these tried-and-true investment strategies:
• Diversify your holdings. By spreading your money among a wide range of investments, you can reduce the effects of volatility on your portfolio.
• Don’t ignore your risk tolerance. If you worry excessively about market fluctuations, you may have too much risk in your portfolio, which means you may need to make some changes.
• Always look at the “big picture.” If you can keep your focus on your long-term objectives, and make decisions accordingly, you can avoid overreacting to short-term events.
By making the right investment moves, you can chart a course that can allow you to move ever closer to your future goals.
This article was written by Edward Jones for use by Evans, the company's financial advisor of Richmond Hill.